Loren Steffy: Pilot issue could hurt United-Continental merger

Loren Steffy: Pilot issue has a bitter past

By Loren Steffy |
January 13, 2011

We are just beginning to see the scope of the problem facing United Airlines as it tries to integrate Continental.

"Scope" is a clause, common in pilot union contracts, that defines who gets to do what flying. It has been at the root of some of the most contentious labor battles in the history of U.S. airlines, and it could pose a significant problem as United attempts to combine its workforce with Continental's.

Last month, an arbitrator ruled that United can't fly regional jets under the Continental name. The carrier wanted to move some 70-seat United Express jets to Continental's hubs in Houston, Newark and Cleveland later this year and operate them as Continental flights. Here's the problem: Continental's pilot contract specifies that only pilots for Continental can fly planes with more than 50 seats. That's why Continental Express doesn't fly 70-seat planes. The United pilots' contract allows its regional affiliates to operate larger aircraft.

Because the two carriers continue to operate separately, moving the United Express jets into Continental hubs and giving them a Continental reservation code was a violation of the pilots' scope clause, the arbitrator found.

It doesn't end there

The issue, though, is far from over.

The efforts to merge the two airlines' unions went to federal mediation last month. While that wasn't a big surprise, it also shows that negotiations aren't exactly going swimmingly.

Continental pilots were quick to praise the arbitrator's ruling, but their victory may be fleeting.

United will still fly the jets from those hubs; it will simply fly them under United's banner. In that, the airline saw a victory.

But both sides are dancing around the far bigger problem: the scope clause itself. Even though both airlines' pilots are represented by the same union, their scope clauses are different. Management will no doubt favor United's, which is more flexible. Continental pilots, seeing the threat of having their jobs outsourced to lower-paid regional affiliate pilots, are unlikely to yield.

Soon after the merger was announced last spring, Chief Executive Jeff Smisek told me one of the deal's big advantages was "fleet rationalization," which is airline jargon for matching up planes and routes efficiently so that the airline flies fewer empty seats.

Wrapped up in that drive for efficiency and profitability, though, is the issue of scope.

Root of the issue

It may seem insignificant, but scope clauses cut to the root of airline labor. In the late 1950s, as airlines began to switch from prop planes to jets, pilots saw the writing on the wall. A jet could fly across the country in half the time, which meant airlines would need half as many pilots. That fear inspired the airline labor movement, and modern scope clauses are a direct descendant of that concern.

Today, the worry is smaller jets operated by affiliates replacing flying by larger planes at the main carrier.

A particularly bitter scope dispute led to a sickout by pilots at American Airlines in 1999, after the carrier acquired Reno Air. American wanted to operate Reno as a separate carrier for a year or more, and pilots worried the carrier would shift flights to their lower-paid counterparts at Reno. They argued that operating Reno separately violated their scope clause. After a sickout that led to the cancellation of more than 6,600 flights and losses of $200 million and a court battle between the airline and its pilots union, American integrated Reno.

A stumbling block

The Continental dispute may not reach that fever pitch, but it clearly has become an impediment to merging the two pilot groups.

It probably won't keep the merger from being completed, but it could keep it from being as successful as Smisek hopes, especially if Continental pilots feel he's trying to balance the economics of the deal on their backs.